Inservice after Loan

[PFranckowiak]

Plan just amended to allow for inservice Distributions as long as the money has been deposited for 2 years. Participant took a loan from the plan for 1/2 the money, now wants to basically take the "rest" of the money in a inservice distribution. Since the loan is secured by 50% of the balance, all that will be left in the plan is the loan. Participant Directed accounts so does not affect other participants. I don't think this is a problem as the loan was secured at the time of the loan, am I correct?

Also says no distirbution can come from funds that are or were subject to Code Section 412. This is a PS/401(k) plan so I an wondering what is meant by this also????

Thanks for you comments.

Pat

[PFranckowiak]

Okay now I need help in calculating it.

Accual wording is: Participant who has attained age 59 1/2 , 100% vested, may request a distribution of all or a portion of the Participant's Account, provided that no distribution shall be made of any funds that have not been held in the account for at least two years and no distributions from funds subject to 412.

Okay. I have participant that requested at distribution. They have 13,000 account balance 2 years ago, including an outstanding loan of 5000. They have taken an additional loan during that time period. They have contributions of only 200.00 during the two years and the rest was loan payments. Account is worth 15,000 now including outstanding loan balance of 7000.

What do I need to do to get the amount available for inservice distribution. I have tried calculating it several different ways and am confused about what is meant by the held in account for two years and how to handle the loan repayments?

Thanks

Pat